How to Obtain High Credit Scores

Do you want to build good credit? You need it to get a car loan and a mortgage. Even cell phone companies offering a 2 year contract will require a $200 deposit if you don’t have any credit! Follow these tips to help obtain high credit scores.

Difficulty: Moderately Challenging

Instructions:

Step 1You need to open a credit card account in order to begin to build credit. Use the card each month.

Step 2Credit: http://www.flickr.com/photos/andresrueda/3027534098/ Andres RuedaDon’t spend what you haven’t got. This sounds so logical that you might feel that your intelligence is being insulted that it’s even on this list, but it is absolutely the most important key to financial stability. And it’s human nature to feel, especially at first, as though “it’s fine, I’ll pay it off in a few weeks after a couple paychecks.” But that’s the start of building debt: the opposite of building good credit. Don’t buy any more than you would if you had cash.

Step 3Credit: http://www.flickr.com/photos/mmmswan/4211839788/ Michael swanPay your credit card bills on time. This is important for 3 reasons. First, being a good customer keeps you in good standing, and that in itself will raise your credit score. Second, paying on time helps you avoid a late fee, which can be as high as $40 per month. That’s $480 per year. And third, paying on time helps you avoid the interest rates charged for holding a balance. Those charges are calculated based on a percentage set by your credit card company. So for example, if you buy $1000 worth of things, and have to pay $100 for your 10% interest rate on the $1000 you didn’t pay, now you owe $1140. Even if you buy nothing else next month (which is unlikely), and don’t pay off the balance, add on another $40 for the late fee. Then add on 10% of $1180 for your interest on the unpaid balance, and you owe $1298, even though you only spent $1000 2 months ago and you didn’t buy anything since (again, unlikely). That amount will continue to compound unless you start paying it. That’s how critical it is to have restraint right from the beginning.

Step 4Credit: http://www.flickr.com/photos/40809819@N05/3762293926/ ohadwebPay your other bills, like rent or mortgage, phone, and car loans. Some (more than before) of these companies will report to credit bureaus.

Step 5Remember, an ounce of prevention is worth a pound of cure. By following these tips, you can avoid getting into debt, and you will build good credit. If you do find yourself having difficulty paying off debt, you will need to do further research on debt reduction. Good luck!